Rabbit Inc. has an asset with a fair market value of $ 450,000 that it wants to lease. Rabbit's wants to recover its net investment in the leased asset and earn an 8%. The asset is expected to have $0 residual value at the end of a 5-year lease term.

Instruction

1. If Rabbit wants to charge annual rent at the beginning of the lease, what amount should the lease payments be (rounded to whole dollars)?
2. Regardless of answer to Part 1, assume the annual lease payment is $120,000, find a journal entry to record the commencement of the lease, including the first payment as the lessor.
3. the necessary journal entry at the end of the first year.
4. Keep everything the same, assume that the carrying value of the asset is $400,000 (instead of $450,000) for Rabbit, the journal entry to record the commencement of the lease.